Mutual funds: A diversified mode of investment

An investor may have multiple numbers of choices to pool his money but when he wants to pool a small amount of money and looking for a plan which will provide him the high rate of return and minimum risk laving least knowledge of pooling of funds, mutual funds will be the most suitable and preferable form of investment. Mutual fund is said to be the most suitable form of investment for a person having very less knowledge of capital market, as it provides an opportunity to invest in a diversified portfolio management. Mutual funds are the most convenient and cost efficient form of investment as one can invest with mutual funds very easily. Mutual fund is a company which combines the investment funds of many investors whose investment goals are similar, and in turn invests those funds in a wide range of securities. Mutual fund is money pooled in by a large number of investors. A large number of investors are involved in mutual fund and the money collected from these investors is invested in capital market instrument like shares, debentures, bonds, etc. and in return the investors get Net Asset Value. In this paper we will learn that what the mutual funds are, how investors get return in mutual funds and why one should invest in mutual funds despite the fact that investors have a lot options to pool their money.